A Call From The Economist To License Economists
It takes years of schooling and a series of hard exams to become a doctor or a lawyer, but just about anyone, with enough tenacity, can become responsible for billions of dollars. Pretty much anyone can call themselves an economist and opine about fiscal policy. Perhaps even more troubling, there exists no uniform set of standards which entitles someone to work in finance. It makes John Kay wonder if we should introduce professional standards to the finance industry.
A lack of understanding and competence inflicted lots of damage. Could that have been avoided if the industry had required passage of a series of exams in order to become a hedge fund portfolio manager, or a quant, or even a banker (and I mean something more demanding than the likes of the Series 7)?
One reason so many smart and ambitious types entered the industry, as opposed to medicine or law, was the high compensation relative to the years of necessary training. Higher standards probably would have discouraged some people from entering the industry, but it would have provided some screening for intellect, ability, and determination.
Of course… It’s for the integrity of the system…
Despite what Milton Friedman would say:
The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.
There were many causes of the mess we’re in… But I don’t think we have any recourse to say that it would have been solved by licensing. It was often those with the highest intellect, ability, and determination who led the charge into the abyss.